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Lecture 13

ECON 30801 Lecture Notes - Lecture 13: Seed Accelerator, Microfinance, Marginal Revenue


Department
Economics
Course Code
ECON 30801
Professor
Donovan
Lecture
13

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I. Review
A. Started off this unit by saying that some small businesses are not acting optimally
1. Marginal revenue is not equal to marginal cost, but this might be because
people can’t get the loans they need to improve their businesses and
invest in more capital
B. Microfinance might not be the answer
1. Contracts are designed poorly, don’t give people enough time to make
real investments for real long-term growth
2. But, not all is lost
a) Just giving people money actually really helps their business…..
II. How do we get money to the right people?
A. Who are the right people?
1. People who will get the largest benefit from our intervention?
2. Like we said, some people are business owners/entrepreneurs because
they have a good idea or enjoy it, and others own a business because
they have no other employment options
a) Can't find a job, so start a business to make a little money
b) As a share of entrepreneurs, subsistence entrepreneurs make up
a decreasing fraction in different countries as the countries get
richer
B. How do we target the 40% of people who know how to be good business owners
and are running a business because they have a good idea?
1. Very difficult to find the right people
2. Start-up accelerators for the poor - in experiment, selected on the exact
thing that they wanted to test - so you don’t know if the cash bonus
helped or if these people just had the best ideas so grew the most
a) Hard to select on targeting
b) How do you pick winners and losers and provide good evidence in
favor of this intervention?
C. Previous Attempts
1. YouWiN - Youth Enterprise with Innovation in Nigeria
a) Business plan competition run by the Nigerian government
b) Goal: find young entrepreneurs that will benefit from capital
injections
(1) Generate jobs by encouraging and supporting aspiring
entrepreneurial youth in Nigeria to develop and execute
business ideas that will lead to job creation
(2) Provide aspiring youth with a platform to showcase their
business acumen, skills, and aspirations to business
leaders, investors, and mentors in Nigeria
c) One-time grant for 1200 selected businesses
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